In our latest installment of the Beyond Oil & Gas series, we turn to America’s favorite pastime and a man by the name of Billy Beane, who helped transform the world of baseball by popularizing a robust new form of empirical data analysis. Then, we’ll share how E&P firms might use similar new data approaches to elevate Supply Chain performance.

In his popular book, Moneyball, Michael Lewis tells the story of the Oakland A’s general manager Billy Beane and how he challenged the baseball industry status quo. Before Beane, the industry relied heavily on highly paid scouts to recruit new players based on ‘gut feelings’ and traditional statistics like stolen bases and batting average, which had low accuracy rates at predicting which players would actually perform best.

This meant it was difficult for low-budget teams like the Oakland A’s to compete with teams like the New York Yankees, who had mammoth salary budgets more than twice as large. With only a fraction of the salary, Beane knew that he had to leverage better data and statistical analyses to recruit quality, yet undervalued and low-budget, players to form a team that could hope to compete.  

In our 'Beyond Oil & Gas' Series, we're excited to bring you the most valuable insights that O&G Supply Chain folks can take away from industries outside the world of Oil & Gas. In our latest installment, we share how a large online retailer and a car company can offer SRM insights and lessons for O&G firms.

In our work with Oil & Gas Supply Chain teams, we consistently hear a tension between two competing goals for supplier relationships:

1. The need for a tough stance on price and productivity
2. The desire to build trust over time, identify shared solutions, and secure supply when the market rises once more

We recently came across two stories from outside the world of Oil & Gas that demonstrate two competing approaches to these goals.

In today’s post, we share these instructive case studies as thought pieces on how Oil & Gas teams can successfully navigate the waters of supplier relationships (and where things can go dangerously wrong!). And at the end, we’ll share a few strategies we’ve seen other O&G Supply Chain teams use to resolve similar tensions.

Steel is the largest metallic cost driver in energy supply chains.  As such, its volatility over 2016 has led supply chain teams to look for ways to manage this cost and mitigate the potential impact of further large increases in the price of steel.

In contrast to base metals like copper, aluminum, and nickel, which have deep and liquid financial derivatives markets, steel production and consumption is fragmented amongst differing grades.  This has inhibited the development of a robust hedging market for steel.

Indeed, volume and open interest in exchange-listed steel contracts looks miniscule relative to major base metals benchmarks.  While steel is admittedly a relatively expensive and difficult commodity to hedge, this post examines the cost and efficacy of options available to American firms wishing to mitigate their steel exposures.  

Featuring

James Wagstaff, Vice President – Oil & Gas, PowerAdvocate
Jayme Mendal, Senior Director – Oil & Gas, PowerAdvocate

What trends in demand are you seeing from energy sector clients in terms of supply chain performance needs?

Jayme Mendal:

A key need we’re seeing from our clients is access to better data on which to base their decisions. For example, there are two broad categories of information that our clients are seeking.

The first would be much better and more accurate and reliable information on their own costs – so their internal data. It’s about answering questions at a very detailed level, what’s actually driving cost differences across their wells, across their suppliers, and across their areas of operation.

The second information need relates more to what’s happening in the market and how they’re performing relative to the market. This is more about answering questions like, “How is the market price for well stim or drilling fluids moving relative to our pricing?”

Our clients are trying to figure out how we can ensure that our pricing remains in line with what’s going on in the market – particularly as things begin to turn.

We're excited to share a brief 10-minute video update on the steel market for Oil & Gas Supply Chain firms. In the video below, we cover:

• How savvy Oil & Gas firms are shifting from importing finished steel products like line pipe to a hybrid approach of importing raw steel plate and taking advantage of rolling and coating services in the domestic U.S.
• Which steel tariffs are still in play, which countries have the lowest rates, and how those tariffs impact future sourcing strategies for more specialized steel products
• Why domestic coating may result in savings on freight costs and regulatory complications
• Why U.S. production of steel plate has historically been lower relative to U.S. production of hot-rolled steel, and why this complicates a completely domestic approach

Interested in talking through your sourcing strategy for steel-based products? Send us a note at costinsights@poweradvocate.com

Earlier this week, news broke of the planned merger of GE’s Oil & Gas business with Baker Hughes. By combining GE’s machinery and equipment focus with Baker Hughes’s services focus, the merger will create one of the largest “fullstream” providers in the energy industry and will likely increase the competitive stance of Baker Hughes against the likes of OFS giants Schlumberger and Halliburton.

Years of shipping oversupply and declines in freight rates have created a shipping crisis that directly impacts Oil & Gas firms. In this market update, our Energy Intelligence Group shares:

• Why slowing trade growth has caused a massive oversupply of containerships
• How oversupply should translate into much lower freight rates for you and your suppliers
• Why the shipping crisis is systemic and how initial bankruptcies in firms like Hanjin signal a larger wave of financial distress
• How that introduces risk of delay and disruption into your Supply Chain (and specific, tactical methods for mitigating that risk)

 Scroll down to view:

Interested in learning more about your exposure? Send us a note at costinsights@poweradvocate.com

Prices for caustic soda have dropped by more than 54% since they peaked in 2009. 

But now, they’re going back up.

Do you have a plan in place to buffer against caustic soda price escalation and drive savings opportunities? 

Click here to download our step-by-step guide on how to capture savings on caustic soda using market data and analysis.

In our latest macroeconomic update, our Energy Intelligence Group shares the latest on key economic factors affecting Oil & Gas Supply Chain teams today. Scroll down for a brief 15-minute update on:

• GDP movements
• The election's impact on Oil & Gas
• Our interest rate outlook
• The recent market rally
• Infrastructure spending
• Spikes in copper
• Protectionism and trade

Interested in learning more? We're always happy to talk: costinsights@poweradvocate.com

In January 2015, monthly line pipe imports to the United States, including circular and welded line pipes, reached 315,000 metric tons. By September 2016, these imports dropped to 60,000 metric tons, more than an 80% decrease in 20 months. While low oil prices over the last two years might have discouraged investment in pipeline projects and thus decreased the demand for line pipe, they impacted less than 30% of US pipeline projects in 2015, according to the US Oil & Gas Association. One significant driver behind the drop in imports remains tariffs.

In today's post, we share some innovative new ways to approaching line pipe sourcing in a world of increasing tariff determinations.